The Kinetic Theory of Economic Crises 69 



guaranty by payment of coin. Bank notes are not accepted, since 

 they are founded upon the unproductive stocks, bonds, and pri- 

 vate notes. The consequence is that the market for future goods 

 is wiped out as with a sponge, and the exaggerated demand for 

 present goods is at last turned specially towards one of them, 

 namely, the real money of liquidation contained in the guaranty 

 fund — gold. Other goods now drop in value and the one good, 

 gold, acquires an unusual importance. 



From the conjunctural point of view, the inordinately high 

 price of present goods indicates a tendency towards a lower 

 environment. While future goods are still in the market, just 

 before the crisis, they are inordinately depressed below present 

 goods, so that the prominent contrast in the market is the relation 

 of future to present goods. The exchange value of future goods 

 is so depressed that no possible technical increase in their output 

 can compensate for the fall. The market being resolved into an 

 exchange of present against future goods, the high value of pres- 

 ent goods is discovered to be all in terms of promises. This is 

 inflation pure and simple. The visualization of the market by 

 the current theories has treated promises materialistically, as so 

 much wares, commodities : 



"His" (the holder's) "cession of property" (in a note) "by 

 sale" (to a banker) "is as distinct and complete as if he had sold 

 a bale of cotton to another merchant." 1 



"Here then" (deposit), "as in the former case, the transaction 

 is in effect a sale, although the use of the word 'deposit' seems at 

 first to justify an entirely different idea of its character." 2 



The market takes the will for the deed ; it obeys the maxim of 

 equity to "consider that as done which ought to be done." So 

 long as negotiable paper is regarded as good, it does not need to 

 be paid. Without ever being paid, it is always treated as though 

 it were paid; and so it continues, by renewals and replacement 

 with new paper, to perform the high duty of circulating goods 

 for an indefinite period. But when it is evident that the promises 

 can not be fulfilled, then one side of this equation, present-future, 



1 Charles F. Dunbar, Chapters on Banking, 1st and 2d ed., p. 11. 

 *Id. id., p. 14. 



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